Health Net 2010 Annual Report Download - page 6

The following table sets forth certain information regarding our employer groups in the commercial
managed care operations of our Western Region Operations segment as of December 31, 2010:
Number of Employer Groups ........................................... 39,315
Largest Employer Group as % of commercial enrollment ..................... 8.8%
10 largest Employer Groups as % of commercial enrollment .................. 24.3%
Detailed membership information regarding our health plan operations in Arizona, California, Oregon and
Washington health plans is set forth below. See “Item 7. Management’s Discussion and Analysis and Results of
Operations—Liquidity and Capital Resources—Critical Accounting Estimates—Health Plan Services
Membership” for a discussion on changes in our membership levels during 2010.
Arizona. Our Arizona health plan operations are conducted by our subsidiaries, Health Net of Arizona, Inc.
and Health Net Life Insurance Company (“HNL”). Our commercial membership in Arizona was 97,159 as of
December 31, 2010. Our Medicare membership in Arizona was 48,598 as of December 31, 2010. We did not
have any Medicaid members in Arizona as of December 31, 2010.
California. In California, our health plan operations are conducted by our subsidiaries Health Net of
California, Inc. (“HN California”), HNL and Health Net Community Solutions (“HNCS”), Inc. HN California,
our California HMO, is one of the largest HMOs in California as measured by total membership and has one of
the largest provider networks in California. Our commercial membership in California as of December 31, 2010
was 1,190,547. Our Medicare membership in California as of December 31, 2010 was 133,197. Our Medicaid
membership in California as of December 31, 2010 was 900,782 members.
Oregon and Washington. Our Oregon health plan operations are conducted by Health Net Health Plan of
Oregon, Inc. and HNL. Our commercial membership in Oregon was 95,085 as of December 31, 2010. Of these
members, approximately 11% are covered under policies issued in Washington state. Our Medicare Advantage
membership in Oregon and Washington was 39,825 as of December 31, 2010. We did not have any Medicaid
members in Oregon as of December 31, 2010.
Medicare Products
We provide a wide range of Medicare products, including Medicare Advantage plans with and without
prescription drug coverage, Medicare Part D stand-alone prescription drug plans (“PDP”), and Medicare
supplement products that supplement traditional fee-for-service Medicare coverage. Our subsidiaries have a
number of contracts with the Centers for Medicare & Medicaid Services (“CMS”) under the Medicare Advantage
and PDP programs authorized under Title XVIII of the Social Security Act of 1935, as amended (most recently
by the Patient Protection and Affordable Care Act of 2010). Effective November 20, 2010, CMS imposed
sanctions on us suspending the marketing to, and enrollment of, new members into all of our Medicare
Advantage, Medicare Advantage Prescription Drug and stand-alone PDP plans. The sanctions do not impact the
enrollment status of our existing Medicare enrollees. The sanctions relate to compliance with certain Part D
regulations. See “—Government Regulation—Federal Legislation and Regulation—Medicare Legislation and
Regulation” and “Item 1A. Risk Factors—Federal and state audits, reviews and investigations of us and our
subsidiaries could have a material adverse effect on our operations, financial condition and cash flows” for more
information about these CMS sanctions.
Medicare Advantage Products
As of December 31, 2010, we were one of the nation’s largest Medicare Advantage contractors based on
membership of 221,620 members. We contract with CMS under the Medicare Advantage program to provide
Medicare Advantage products directly to Medicare beneficiaries and through employer and union groups. We
provide or arrange health care services normally covered by Medicare, plus a broad range of health care services
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